Whether you are looking to buy a home in New Jersey or any other part of the country, applying for a mortgage is one of the most important aspects to consider. Properly preparing to get that all-important loan is something some buyers overlook, which can cost them the home of their dreams, as well as thousands of dollars in extra interest. Here are a few tips to help make sure that doesn’t happen to you.
Organize Your Paperwork
All lenders need to verify your income and financial information before granting a mortgage. Your lender or mortgage broker should provide you with a specific list but, according to the Consumer Financial Protection Bureau, most lenders generally ask for:
A purchase contract, if you have one for the home you are buying.
- Social Security numbers or individual taxpayer identification numbers for all borrowers.
- Your home addresses for at least the past two years.
- Current names, account numbers, and balances of checking, savings, money market, retirement, and credit card accounts.
- The address of your bank branch.
- Checking and savings account statements for the past three months
- Your most recent pay stubs, W-2s, or other proof of employment and income verification.
- Federal income tax returns for the past two years.
- Evidence of any other income you receive (child support orders, Social Security award letters).
- Balance sheets and tax returns if you are self-employed.
- Divorce settlement papers if applicable.
- Canceled checks for rent or utility bill payments, to show payment history.
- Information on other consumer debts, such as credit cards, car loans, furniture loans, student loans, and department store credit cards.
- Gift letters, if you are using gifts from parents, relatives or organizations, to help cover the down payment or closing costs.
Check Your Credit
Your credit report, credit score, credit history, debt, savings, total assets, and current income are all reviewed by the lender. Usually, the lower your credit score is, the higher your interest rate. That’s why it is crucial that the report is accurate.
A Federal Trade Commission study of the U.S. credit reporting industry found that five percent of consumers had errors on one of their three major credit reports that could result in less favorable terms for loans. Of those cases,slightly more than one in 10 consumers saw a change in their credit score after the credit reporting agencies (CRAs) fixed the errors. Credit reports are free through Annual Credit Report.com. If you do find any errors, you can work with the CRA to fix it.
Manage Your Debt
Another key factor is your debt to income ratio (DTI), which represents the total amount of monthly debt payment (including the home payment) divided into monthly income. This is one way lenders measure your ability to make your monthly mortgage payment. Eliminating or reducing debt will help to lower your DTI, putting you in a better position when it comes time to apply for a mortgage. Just make sure you do it the right way and talk to a trusted financial advisor about making a plan.
Finding the right mortgage should be easy. NVE’s award-winning Mortgage Specialist can help you determine your specific needs and choose the mortgage product that makes sense for your lifestyle. For information about our mortgage options, contact NVE’s Mortgage Specialist at 201-816-2800, ext. 233. You can also visit the NVE website, one of our convenient neighborhood branches in Bergen County, or call 1-866-NVE BANK to learn more.